The only two types of assets that can consistently break through the 11% benchmark for returns are: technology assets and cryptocurrency assets.

Written by: Raoul Pal

Translated by: Chopper, Foresight News

You’ve been managing your assets according to the financial strategies taught by others, but the results have been unsatisfactory.

Save a sum of money, allocate a pension fund, invest in index-tracking funds, and buy a property if the opportunity arises... Every year you receive an asset statement, and the numbers on paper have increased compared to last year. You keep the documents handy, gaining a slight sense of comfort. Twenty years pass quickly, the account value rises steadily, yet your real life hasn’t fundamentally changed. You still can’t afford a whole year’s vacation; you still can’t refuse jobs you don’t like. Logically, by now, you should have greater financial freedom, but reality is not so. Perhaps at some moment, you blame it all on yourself.

But the problem is not with you. In the past, people advised you to build a traditional asset portfolio: allocate bonds for safety, buy a small amount of gold, purchase property if possible, and invest in index funds for value appreciation, ensuring asset diversification to avoid a single asset's collapse causing significant damage. This advice was effective in the past, but it was designed for a different era, one that no longer exists.

I deeply resonate with this; building such investment portfolios used to be my job.

I was a hedge fund manager, and this asset allocation logic was not my personal preference but rather the survival principle of the industry I was in. People constructed a portfolio capable of withstanding various market shocks, hedging one type of risk against another, holding with peace of mind, because a single asset's collapse wouldn’t inflict fatal blows on overall wealth. I practiced this trading paradigm for many years. For the past twenty-one years, I have continuously written research reports for hedge funds and family offices, and the macro environment on which this system relies is undergoing radical changes.

Next, I will outline a new asset allocation strategy, while also clarifying that this plan is not as radical an investment choice as the public perception often suggests.

The Source of Economic Growth

Let’s start from the underlying logic of economic growth, from which all wealth rules derive. A country can achieve wealth growth through three pathways: increasing labor supply, improving the output per labor unit, or expanding through debt. This comprises the total formula for economic growth.

For the vast majority of the last century, the first two engines drove economic growth. Continuous population growth and technological innovation continually enhanced worker productivity, while debt merely played a supportive role. Now both growth engines have stalled: birth rates began declining several decades ago, and labor productivity growth has been decreasing for years. Economic growth now almost entirely relies on the third path - debt, which itself is a trap. Debt requires interest payments, and the only politically feasible way to repay is through currency issuance.

The government continues to accumulate debt, interest on interest accumulates, and central banks release currency to absorb this debt, while the cash you hold continues to depreciate each year.

Global liquidity, which is the total scale of currency and credit within the entire financial system, expands at an annual rate of about 8%, which embodies the essence of currency devaluation. If the total amount of money in the market increases by 8% each year, the scarcity of money decreases by 8%, ultimately causing its value to shrink by 8% annually. On top of this, ordinary inflation, often referenced in the news at around 2%-3%, covers everyday consumption and housing costs, and almost everyone regards outperforming this figure as a financial goal. Outperforming ordinary inflation merely means maintaining your current living expenses and does not truly equate to wealth appreciation.

By summing these two figures, we arrive at the true wealth dividing line, taking an annualized 11% as the benchmark.

If your asset's annualized return is above 11%, your purchasing power can improve; if below this line, no matter how attractive the numbers on your statement are, your purchasing power is eroding, because the currency that values your assets is continuously depreciating. You must achieve an annual return of 11% just to maintain your existing wealth level.

This definition completely rewrites the criteria for asset selection. We no longer cling to selecting assets that appear safe and well-diversified, but instead filter for assets that can consistently break through the 11% benchmark.

Next, we will assess the mainstream investment categories on the market one by one.

Evaluating Mainstream Assets One by One

Let’s start with bonds. Most people hold bonds but have never truly understood their essence.

A bond is fundamentally a loan. You lend out funds, receive a fixed interest each year, and recover the principal at maturity. This is the complete income model of a bond. The fixed interest rate set by the issuer aligns with ordinary inflation levels but does not account for the devaluation loss from currency dilution. For example, a government bond with an annualized return of 4% promises to pay 4% interest annually, but the currency is depreciating at a rate of 8% per year; by the time the bond matures and principal is returned, the actual purchasing power of that money has significantly diminished. Even if you hold the bond until maturity and receive all promised returns, your real wealth still shrinks.

Real estate is the most controversial category and needs to be approached cautiously.

The underlying logic of real estate hedging against devaluation still holds: borrowing at fixed rates to purchase physical assets priced in depreciating currency. The real burden of debt decreases over the years, and real estate prices follow the increase in money supply. It’s undeniable that real estate is indeed a good anti-devaluation tool; I myself have invested in real estate.

However, a generation achieved wealth increases through real estate not from the properties themselves, but from the timing window of mortgages. If you leveraged to buy property at the beginning of a long-term lowering interest cycle, the asset’s valuation would increase year after year. This golden transaction is no longer replicable; rates first dropped to zero, then rebounded.

Today, it has become very difficult for most people to secure quality mortgages: the price-to-income ratio remains high, and mortgage rates are also elevated.

Even if you manage to secure a mortgage, the ability of real estate to hedge against currency devaluation is far from what it used to be. Since 2007, the rate of increase in global liquidity has far outpaced real estate prices, causing the ratio between the two to decline. Your property’s nominal dollar price is rising, but its real purchasing power has long diminished.

Let’s talk about gold. We need to view the value of gold objectively and avoid drawing mistaken conclusions from the market’s performance over the past year due to one-sided judgments.

Gold has experienced an epic rise. In January this year, gold prices broke through $5,500 per ounce, setting a new record; as of the end of August, gold prices retreated to around $4,600, representing an increase of about one-third for the year. Financial media referred to this trend as the "devaluation trade." On the surface, gold's returns significantly exceed the 11% benchmark, yet I have not previously been optimistic about gold's appreciation potential.

The core difference lies in: comparing gold prices with the scale of central bank balance sheets over the past fifteen years reveals that gold's value has roughly kept pace with the central bank's expansion, which is precisely gold’s positioning. Gold preserves purchasing power and hedges against the devaluation risks stemming from excessive currency issuance, a value that cannot be denied, and I am not intending to diminish gold’s role.

Preserving purchasing power and achieving wealth appreciation are two completely different matters. Gold lacks a user penetration growth curve and has no commercial ecosystem depending on it. Gold price fluctuations entirely hinge on market panic regarding the currency system; as current market anxiety rises, gold prices are naturally elevated. Over the long term, gold will not achieve compounded appreciation just because the number of global users continues to grow. Gold is responsible for value preservation, not for creating new wealth.

Lastly, stock assets generally outperform the previous types of assets. Over the past decade, the annualized compound return of the S&P 500 index has been around 13%, barely crossing the 11% threshold; this achievement is reliant on the strongest bull market in financial history lasting over a decade.

The only two types of assets that can reliably break through this yield line are technology assets and cryptocurrency assets.

Why Technology and Cryptocurrency Assets?

We compare the annualized returns over a ten-year period, a time frame sufficient to encompass one cycle of declining markets while remaining entirely within the macro cycle of currency depreciation.

Gold has an annualized return of about 12%, the S&P 500 about 13%, NASDAQ 100 about 20%; Bitcoin, depending on the statistical criteria and starting point, has annualized returns ranging from 58% to 70%.

Compared to the 11% return benchmark, the gaps are clear.

The logic behind this outcome is far more critical than the return rates themselves. If the returns are merely due to luck, this conclusion holds no practical value.

The fact that two asset types can deliver high compounding returns is fundamentally because both adhere to the user penetration S-curve growth principle rather than traditional value assets. Metcalfe’s Law states that the larger the network, the greater the value that existing users receive. User penetration does not rise linearly; it presents a classic S-curve: slow growth in the early stages, explosive expansion in the mid-phase, and market saturation in the later stages. As long as an asset is in the steep growth phase of the curve, returns can outpace the speed of currency issuance, not solely relying on market sentiment manipulation.

Thus, our focus of discussion no longer revolves around whether technology and cryptocurrency assets will outperform traditional categories but rather whether their user penetration curves have reached their peak. The answer is no; the next batch of participants entering the ecosystem is not human users. I will elaborate on this later, a long-term variable that the market is currently seriously underestimating.

Why Traditional Diversified Configurations Have Lost Protective Power

Traditional investment portfolios are built on a core assumption: bonds, gold, real estate, and stocks belong to four completely independent types of risk, and by holding all four types of assets, a single black swan event will not breach the overall asset pool. This logic has long held but fundamentally changed after 2008. Liquidity has become the core force determining the pricing of all assets; the four asset classes no longer correspond to four independent risks, but rather are distinct pricing products under the same macro variable.

Your bond trades essentially bet on liquidity changes; gold functions as a liquidity trading vehicle; real estate also fluctuates with liquidity cycles, and index funds are simply better-packaged liquidity assets.

I do not deny the significance of diversified allocation; a diversified layout is itself a reasonable financial strategy, and I also diversify my holdings. The issue lies within the underlying assets of the traditional portfolio: of the four asset types, three cannot exceed the 11% return benchmark, while the fourth can only barely meet it during the strongest bull markets. You painstakingly balance four asset types, essentially betting on the same macro logic, while the returns of most assets fail to keep pace with the speed of currency supply expansion.

What is worth contemplating is not the number of holding assets, but whether the funds you wish to use for appreciation are allocated to assets with long-term compounding potential. Strive to invest in genuine long-term growth pathways; if everything you diversify into are assets that underperform the benchmark, so-called stable diversification only brings psychological comfort and does not enhance actual returns.

Where Real Value Is Embedded

In the cryptocurrency industry, we need to decide which tier of assets to allocate to, weighing trade-offs objectively and avoiding absolutist conclusions.

Application layer protocols can indeed generate high returns, provided you select truly quality projects that meet real commercial needs, returns can even surpass foundational blockchain networks.

The challenge lies in precisely screening superior applications. Foundational blockchain networks underpin all ecological settlement activities; regardless of which application ultimately succeeds, value will consolidate within the foundational infrastructure. You do not need to precisely predict which application will come out on top; you simply need to be confident that future economic activities will gradually migrate onto the chain. Betting on foundational blockchain returns may not yield as much as betting on breakout applications, but it involves lower judgment difficulty and still leaves substantial growth space within the ecosystem.

This is also why traditional valuation models do not apply to cryptocurrency assets. The industry directly replicates stock valuation systems without ever validating whether these indicators fit the blockchain ecosystem: transaction multiples, revenue growth rates, locked value ratios. At GMI, we backtested all valuation metrics for twelve major blockchains and found that none could effectively predict future returns. The only useful predictive metric is whether funds, after inflow, remain in the ecosystem for the long term.

When you understand the essence of blockchain, this logic becomes easier to grasp. Public chains are not enterprises selling products for profit; network value derives from all the ecological applications built on it, not from profit through transaction fees. Valuing Ethereum simply based on transaction fees is like estimating internet value in 1998 just based on email service fees.

This is also why I choose to write this article now rather than waiting two years.

All industry scale forecast reports on the market hide the same underlying assumption: ecosystem users are humans, participating in economic activities according to human behavior patterns, making a few transactions a day, small payments monthly, and occasionally initiating queries.

This assumption will soon become outdated. AI entities, which can independently sense, decide, and execute operations without human commands, are set to enter as independent economic participants, rather than serving merely as tools. According to the industry forecasts I have seen, in the future, the ratio of non-human intelligent identities within companies to human employees may even reach 80:1.

AI entities cannot open bank accounts; they lack legal identities and cannot visit offline locations to conduct business, nor can they tolerate traditional settlement systems that close processing windows at 5 PM or take three days for transfers. Intelligent agents require a set of programmable currency, relying on an ever-operating payment infrastructure, which is exactly the capability native to public chains, something traditional financial systems cannot fulfill.

The whole infrastructure is publicly rolling out: Anthropic has open-sourced contextual protocol models; Google has launched Agent2Agent and released a preview of WebMCP, allowing websites to directly open up functional interfaces to intelligent agents, negating the need to simulate human click operations; Coinbase has rebooted the x402 protocol, enabling intelligent agents to make payments to each other via HTTP links.

This set of product launches is itself a forward-looking demand for settlement capacity; regardless of whether speculative funds enter the scene, real business demands will continue to expand.

Serious Risk Warnings to Address

Betting on a single track easily leads to survivor bias, and those who intentionally avoid this risk often have marketing agendas.

You can always hear success stories of someone going all in on a single asset to achieve financial freedom, but you will not see the thousands upon thousands of investors who heavily invested in a single asset end up completely wiped out; the failures do not come forward to share their stories. It is worth reading anonymous transaction confession posts, where the real endings are often bleak; this serves as a more objective market sample than wealth accumulation stories.

Therefore, I do not recommend betting all your funds on a single asset, and this has never been my viewpoint.

The true financial logic is: once you pinpoint a genuine long-term growth pathway, the number of holding positions does not significantly influence the outcome. Ultimately, returns are determined by two core variables: the proportion of funds allocated to the growth pathway and the holding period of the assets.

There is a third hard rule, a strict prohibition: do not use leverage. Do not use small-scale leverage, nor the so-called cautious leverage, and do not set stop-loss protections. Leverage will strip away the core confidence of this long-term strategy — you do not want to be forced to close positions during a 50% drawdown. Even if your judgment about the ten-year-long cycle is wholly accurate, you could still be wiped out in two weeks of intense declines; the market will not cushion your losses just because your long-term logic is correct.

For most ordinary people, a reasonable asset allocation plan is a tiered layout. Retain some traditional asset combinations to ensure asset security and a sense of peace; allocate a significant amount of funds to long-term growth pathways, controlling the position of these high-elasticity assets so that even if they lose half their value, it will not force you to make panic sell decisions; the remaining energy can be devoted to life.

After thirteen years of observing the crypto market, I have discovered that those who can achieve long-term compounding returns are often not the ones engaged in frequent trading. In times of market declines, the drawdown is a startling reality; when viewed over an extended period, it proves to be nothing more than a negligible fluctuation on the graph. Doing nothing is actually a trading strategy in itself, yet very few people genuinely execute this strategy, which is far more challenging than one might imagine.

What True Opportunity Cost Looks Like

If your asset’s annual compound return falls below the 11% benchmark, the wealth you earned through your labor that year will buy you less freedom than the previous year.

Investors who comprehend this logic will ultimately not harvest a vast pool of balance sheet funds but will instead gain options. They won’t need to constantly watch the markets, will have the confidence to reject jobs they dislike, and at a young age, will venture to the places they cherish, accompanying those they value.

This is the true opportunity cost behind the 11% return benchmark.

I will not provide you with a fixed asset allocation checklist. I do not understand your debt pressures, investment cycles, and risk tolerance. Anyone who gives you a position allocation without understanding these three premises is essentially betting with your money based on guesses.

What I can offer is this set of screening criteria. Use the standard of 11% annual return to measure all the assets you hold one by one. Regardless of how stable and comfortable your holdings feel, any asset that cannot outperform this benchmark is consuming your time and freedom.